[YARDENI] 'The Full Monty'
' Y2K Corporate
Disclosure
Project
On my web site, you can now access a searchable database of the Y2K disclosure
statements extracted from the annual and quarterly reports filed by the S&P 500
corporations with the Securities and Exchange Commission. The basic message
seems to be, "We believe that our company will be compliant, but we are worried
that everyone else we depend on might not." Many managements add that while
they are optimistic all will be well at the turn of the century, they admit that there is
a risk that "our business could be severely disrupted."
Most of the Y2K statements sound as though they were written by lawyers. I'm
sure they were. The corporate lawyers' main job in this case is to protect their
companies from lawsuits. Unfortunately, their parochially commendable goal is not
in the best interest of the public or even their own companies. Corporations are
clearly violating the spirit of SEC Legal Staff Bulletin No. 5, which advised them to
avoid boilerplate and to be very specific about how Y2K might effect their business
activities.
In my opinion, too much vitally important information is suppressed and withheld by
the gag order that lawyers are, in effect, imposing on their managements. We all
need to know whether the companies we depend on will be ready in 2000. We need
THE FULL MONTY! We need companies to disclose everything about their Y2K
progress and risks on a quarterly basis, at a minimum.
Y2K Corporate
Disclosure
Project
GM's Disclosure. GM's 1997 annual report is an all-too-typical example of the
all-too-brief Y2K disclosure that corporations are providing investors. GM's
two-paragraph Y2K section does not mention that the company's CIO sees
"catastrophic problems" at every plant, as noted above. The only risk disclosed to
investors is that the "inability of GM or significant external interfaces of GM to
adequately address Year 2000 issues could cause disruption of GM's business
operations." On the other hand, "many of GM's systems are Year 2000 compliant,"
says the annual.
Ford's 1997 annual report said it expects to be fixed by the end of 1998 and testing
in 1999. More ominously, it warns that the company "has little to no control over
whether its suppliers or dealers will make appropriate modifications to their systems
and applications on a timely basis." If some fail to do so, Ford's "operations and
financial results could be adversely affected."
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